Maison Solutions Inc. Income Taxes Disclosure

16. Income taxes

 

Maison is a Delaware holding company that is subject to the U.S. income tax of 21%. Maison Monrovia and Maison San Gabriel are pass through entities whose income or losses flow through Maison Solution’s income tax return. Maison El Monte and Maison Monterey Park are Subchapter C corporation (“C-Corp”) incorporated in the state of California, are subject to U.S. income tax of 21% and California state income tax of 8.84%. Lee Lee was a Subchapter S corporation (“S-Corp”) incorporated in the state of Arizona prior to the acquisition by Maison, and was converted into a Limited Liability Company (“LLC”) on June 10, 2024. Both the S-Corp and LLC are pass through entities whose income or losses flow through Maison Solution’s income tax return.

 

The provision for income taxes provisions consisted of the following components:

 

		Year ended April 30, 2025				Year ended April 30, 2024
Current:
Federal income tax expense		$	166,783			$	312,010
State income tax expense			95,552				140,250
Deferred:
Federal income tax benefit			(75,669	)			(9,136	)
State income tax benefit			(12,677	)			(2,562	)
Total		$	173,989			$	440,562

 

The following is a reconciliation of the difference between the actual (benefit) provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income (loss) before income taxes:

 

		Year ended April 30, 2025				Year ended April 30, 2024
Federal statutory rate expense (benefit)			229,929				(618,758	)
State statutory rate, net of effect of state income tax deductible to federal income tax			(7,384	)			(185,283	)
Permanent difference – penalties, interest, and others			121,442				32,047
Utilization of NOL			(847,792	)			--
Change in valuation allowance			677,794				1,212,556
Tax expense per financial statements			173,989				440,562

Deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred taxes were comprised of the following:

 

		April 30, 2025				April 30, 2024
Deferred tax assets:
Bad debt expense		$	75,141			$	66,888
Inventory impairment loss			78,988				38,279
Investment loss			294,983				150,684
Lease liabilities, net of ROU			796,543				660,713
NOL			871,411				1,125,192
Valuation allowance			(2,079,374	)			(2,026,613	)
Deferred tax assets, net		$	37,692			$	15,143
Deferred tax liability:
Trademark acquired at acquisition of Maison Monterey Park and Lee Lee		$	1,221,606			$	1,287,403
Deferred tax liability, net of deferred tax assets		$	1,183,914			$	1,272,260

 

As of April 30, 2025 and 2024, Maison and Maison El Monte had approximately $2.05 million and $3.20 million, respectively, of U.S. federal NOL carryovers available to offset future taxable income which do not expire but are limited to 80% of income until utilized. As of April 30, 2025 and 2024, Maison and Maison El Monte had approximately $3.20 million and $3.56 million, respectively, of California state net operating loss which can be carried forward up to 20 years to offset future taxable income. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the Company’s future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.

 

The Company recorded $0 and $10,985 of interest and penalties related to understated income tax payments for the years ended April 30, 2025 and 2024, respectively.

 

As of April 30, 2025, the Company’s U.S. income tax returns filed for the year ending on December 31, 2021 and thereafter are subject to examination by the relevant taxation authorities.